Re-Engineering of Trading Process and Re-

Design for Implementation Electronic Process for

Trading Companies

Zahra Ghorbani Ravand and Salman Salimi Sadr SIFCO Company (Separouk Iranian Farda Procurement Company)

Email: ravand@sifcompany.com, s.salimi@sifcompany.com

Abstract—Indeed, the electronic facilities, on which all

modern system based, plays a basic rule for designing

practical systems for companies’ especially commercial and

trading companies. This paper focuses on trading process

and new facilities and tools for doing trading works through

Internet and the influence of Electronic tools on process. We

first conceptualize main process for a trading company and

based on designed process, suggested electronic system with

considering rules and conditions for e-commerce and

trading companies. We tried to draw a practical system with

supplier-based perspective using interaction approach.

Second, we introduced new electronic tools and facilities in

order to perform process of trading activities and new

approach of development of business relationships, and re-

design process. For evaluation of designed system, we had a

trial in SIFCO as a trading company for steel materials and

assessed the data in result of implementation system and

finally we measured performance of system with

considering two criteria: Time and Accuracy.

Index Terms—trading company, trading process, e-

commerce, re-engineering

I. INTRODUCTION

Standardization and automation of processes are top

priority on larger companies’ e-business agenda.

Establishing a common understanding of collaborative

processes showed the highest productivity gains. The

paper looks at derived requirements and best practices

from a set of hand on examples of trading organization.

Trading is a branch of commerce and is the

combination of procurement and selling. The main

process of trading included Planning, Marketing,

Procurement, Selling and Finance.

First of all, in this article, after evaluation of literature

survey, we draw process of trading and assessment of

process. Then we introduce the new tools and facilities

for improve process in virtual spaces. After that, we re-

engineer the process of trading with help us modern

facilities in virtual space. Finally, we evaluate the e-

process for trading with considering two criteria: Time

and Accuracy.

II. LITERATURE SURVEY

Manuscript received October 17, 2013; revised January 23, 2014.

Trading is an integral part of B2B processes and an

essential part of any organization’s ability to function

effectively but has only recently emerged as an important

topic within the fast-growing B2B e-commerce market

[1]. An e-trade B2B system is an open system that

enables the organization to reach and transact with

suppliers and customers in virtual markets [2].

For many years stock markets were physical locations

where buyers and sellers met and negotiated. [3]

Exchange trading would typically happen on the floor of

an exchange, where traders in brightly colored jackets (to

identify which firm they worked for) would shout and

gesticulate at one another–a process known as open

outcry or pit trading (the exchange floors were often pit-

shaped – circular, sloping downwards to the center, so

that the traders could see one another). With the

improvement in communications technology in the late

20th century, the need for a physical location became less

important and traders started to transact from remote

locations in what became known as electronic trading [3].

Electronic trading made transactions easier to complete,

monitor, clear, and settle and this helped spur on its

development [4]. One of the earliest examples of

widespread electronic trading was on Globex, the CME

Group’s electronic trading platform conceived in 1987

and launched fully in 1992. [5].This allowed access to a

variety of financial markets such as treasuries, foreign

exchange and commodities. The Chicago Board of Trade

(CBOT) [6] and [7] produced a rival system that was

based on Oak Trading Systems’ Oak platform branded ‘E

Open Outcry,’ an electronic trading platform that allowed

for trading to take place alongside that took place in the

CBOT pits. Set up in 1971 [8], NASDAQ was the world's

first electronic stock market, though it originally operated

as an electronic bulletin board [9], rather than offering

straight-through processing (STP) [9].

By 2011 investment firms on both the buy side and sell

side were increasing their spending on technology for

electronic trading. [10] With the result that many floor

traders and brokers were removed from the trading

process. Traders also increasingly started to rely on

algorithms to analyze market conditions and then execute

their orders automatically. [11] The move to electronic

trading compared to floor trading continued to increase

with many of the major exchanges around the world

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moving from floor trading to completely electronic

trading. [12].

Trading in the financial markets can broadly be split

into two groups [13]:

Business-to-business (B2B) trading, often

conducted on exchanges, where large investment

banks and brokers trade directly with one another,

transacting large amounts of securities, and

Business-to-consumer (B2C) trading, where retail

(e.g. individuals buying and selling relatively

small amounts of stocks and shares) and

institutional clients (e.g. hedge funds, fund

managers or insurance companies, trading far

larger amounts of securities) buy and sell from

brokers or "dealers", who act as middle-men

between the clients and the B2B markets [14].

While the majority of retail trading in the United States

happens over the Internet, retail trading volumes are

dwarfed by institutional, inter-dealer and exchange

trading [15]. However, in developing economies,

especially in Asia, retail trading constitutes a significant

portion of overall trading volume. For instruments which

are not exchange-traded (e.g. US treasury bonds), the

inter-dealer market substitutes for the exchange. This is

where dealers trade directly with one another or through

inter-dealer brokers (i.e. companies like GFI Group and

BGC Partners. They acted as middle-men between

dealers such as investment banks) [16]. This type of

trading traditionally took place over the phone but

brokers moved to offering electronic trading services

instead. Similarly, B2C trading traditionally happened

over the phone and, while some still does, more brokers

are allowing their clients to place orders using electronic

systems [17]. Many retail (or "discount") brokers (e.g.

Charles Schwab, E-Trade) went online during the late

1990s and most retail stock-broking probably takes place

over the web now [18].

This knowledge allows for effective negotiations with

suppliers. Organizations should address key functional

areas such as those presented in Fig. 1 [19].

Figure 1. Taxonomy of functions in e-business applications.

The Fig. 1 shows the main categories for designing e-

process based on functional activities. Overall, this chart

is led to categorized organization activities in accepted

way.

III. CASE STUDY

A. Methodological Approach

The case study presented in this paper examines the

analysis of the Trade process and definition of functional

specifications of new e-trade system, undertaken by the

SIFCO Management Department. The objective of the

analysis is the identification of potential problematic

areas and the design of the new process in order to define

the appropriate functional specifications and maximize

the possibilities of a successful implementation of a new

e-Tender system. The methodology was supported by the

use of specialized process modeling and workflow tools

[20]. Both qualitative and quantitative analyses were used

in order to successfully identity the existing problematic

areas. A set of performance indicators was defined

including mean cycle times, transaction volumes

(quantities, values, number of requests and tenders) and

organizational units’ capacities [21]. The results of the

analysis guided to the re-engineering suggestions in three

levels of changes and to the design of the new process

with the use of process charts. The functional

specifications definition was based on the new system

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design and the overall findings of the analysis [22]. The methodology followed is presented in Fig. 2.

Figure 2. The methodology for the assessment of the functional specifications.

The Fig. 2 illustrates the methodology for evaluation of

functional which is used in trading process. According to

present status and what we want to design, the gap

recognizes and problematic area specify. After solving

problems, the re-engineering process will be done.

The methodology followed in SIFCO’s procurement

system is not far from what describes as business process

improvement (BPI) [23], emphasizing on quality and

productivity improvement, bureaucracy elimination,

process simplification and processing time reduction.

B. Tender System’s Overview

The Tender process was designed in 5 processes which

are as per below:

Trading Plan (TP);

Marketing;

Finance;

Procurement

Selling.

The Fig. 3 illustrates the relation and interaction

between main processes of trading [24].

Figure 3. The main process of trading.

Fig. 3 demonstrates the main processes for trading

activities and also the relations and interactive.

C. Objectives Definition of the New System

The definition of the required functional specifications

should be in line with a well-defined set of objectives. [25]

The Members of boards of SIFCO and Managing director

should generate these objectives, after taking into account

the critical success factors (CSFs) and the key

Preparation of Trading Plan

Marketing

Finance

Selling

Procurement

• Budgeting and Cash Flow

• By Customer

• By Trader/ Stock or bond

• Contract or PO

• Purchasing

• Manufacturing and Supply

• Guarantees and Services

• Contract or PO

• Shipment and Delivery

• After Sales Services

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performance indicators (KPIs) of e-trader systems. Case

studies concerning the introduction of similar systems in

other companies helped in the definition of the following

CSFs:

Time of trading process;

Accuracy of Data and Information.

The above CSFs were coupled by a set of KPIs that

should be monitored [26], the most important of which

are the following:

Efficient processes without excessive idle times;

Existence of monitoring and evaluation systems

that permit the continuous improvement of the

processes;

Adequate training of the employees in order to

enable them takes advantage of the new system;

Tender lead times.

Percentage of purchasing with accepted quality (in

accordance with the predefined technical

specifications).

Productivity of resources (both human resources

and information systems).

Budget accuracy (deviation of the actual

purchasing compared with the related budget).

Cost (including all the relevant cost categories,

together with the cost of the purchased goods or

services).

The combination of the recognized CSFs and KPIs,

supported by the clear vision of the SIFCO’s Managers,

enabled the definition of the objectives of the Tendering

system:

The purchasing of quality goods and integrated

services.

The realization of short activity lead times of the

trading process.

The minimization of cost, such as restrictions in

reducing the workforce, or changing the

organization chart.

D. Analysis of the Existing Tendering Process

The analysis of the existing trading process was the

first stage of the methodology followed. [27] The analysis

focused on two important areas: at first, organizational

structure and then, processes and activities.

Existing organizational structure: The

organizational chart was supported by the

description of the main activities undertaken by

each organizational unit, their staff levels and the

committees held on a regular basis. The Fig. 4

shows the organization units in trading process

accordingly.

The Fig. 4 shows the main partners who are participate

in trading process and their responsibilities.

Figure 4. The organization units in trading process.

Processes and activities: Based on information

collected after the completion of interviews held

with employees of all management levels, past

reports generated by the Planning department

(historical data) and previous analysis on the

trading system, five main processes, 20 sub-

process were identified. The five main processes

are depicted in Fig. 5, which represents the first

level analysis of the trading process. Each process

was further analyzed and was graphically

illustrated with the use of process charts, which in

our case were sub-process charts (second level of

process analysis).

Fig. 5 illustrates the process chart and the sub-process

according to functional categories. Moreover, a detailed

sub-process description was created for each one of the

sub-processes including their objectives, their application

areas, inputs, outputs, the involved departments, the

supporting information systems used for the completion

of the sub-process and a detailed description of the tasks

for each activity of the sub-process (third level of process

analysis) [28].

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Figure 5. The sub-process of trading process.

E. Problematic Areas Identification

The new process design was based on the analysis

results and the identification of problematic areas that

could be improved by the introduction of an electronic

system. The basic steps of the analysis of the problematic

areas are the following:

Qualitative analysis based on the tools used in the

process analysis.

Visualization of problems’ causes and effects with

the use of fishbone diagrams.

The most important findings of the qualitative analysis

can be summarized as follows:

Heavy work load at specific organisational units.

Delays due to mistakes at the customer

requisitions.

Iteration of the set of activities of ‘‘delivery of

recommendation’’ and ‘‘consolatory response’’ of

the selling and purchasing Department.

Delays on the technical evaluations of proposals.

Process segmentation into various departments

and committees.

High ratio of checking and controls that causes

delays.

Variations, exceptions and special cases of the

tendering sub-processes.

Issue of multiple copies of the documents.

Extremely large number of documents and

transactions.

Multiple filling (iteration and dissemination of the

information).

Difficulty in searching information from manually

maintained and massive archives.

Deficiency of document standardization.

Same data entry to different applications (mainly

for purchasing and selling).

Manual and iterated data entry to applications.

Information technology supporting a very small

percentage of activities. Most of the activities are

carried out manually.

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The most important findings of the quantitative

analysis can be summarized as follows:

The tender lead times are long. A large percentage

of the delay is due to idle time between the

activities of the process. In particular,

The lead time in the case of the open procedure

procurement is 6–7 months (average value).

The lead time in the case of the restricted

procedure procurement is 11–12 months (average

value).

The maximum values of the procurement process

(both of the open and the restricted procedure)

extend to 2 years’ time.

The sub-processes acting as bottlenecks in the process

are the following:

The technical evaluation which accounts for 40% of

the total tender time in the case of open procedure

procurement.

The pre-selection of suppliers who are invited for

submitting proposals accounts for 54% of the total

tender time in the case of restricted procedure

procurement.

The activities with the longest lead times are the

following:

The examination of suppliers’ requests for

participation to restricted tenders, which accounts

for 24% of the total restricted tender time.

The technical proposals evaluation from the

technical committees, which accounts for 13% of

the total time for open tenders and 8% for

restricted tenders.

One hundred documents (average value) are used

internally and externally in each tender process.

Forty-six thousands documents (average value) are

used for the tenders in 1 years’ time.

F. New Process Design and Expected Benefits

The purpose of the new process design was to improve

the identified problematic areas. Based on the findings

presented above, new process charts and descriptions

were developed for the e-trading model. A summary of

key points that were introduced by the new process is as

follows:

Single location filing.

Electronic document flow and control. This

includes a common database for all the

organizational units and all the sub-process of the

purchasing process, integrated document

management system, automatic information

transfer, authorization and permissions with

different access levels.

Document standardization and simplification.

Rationalization of the number of documents used.

Elimination of non-value-added activities in the

cases where there is no legal constraints.

Information technology support for most of the

activities, but not for all of them.

Reduction of supply costs: The estimation of the

study concerning the existing costs of supply (of

purchased goods) is a 1% cost reduction.

G. Functional Specifications Definition

The design of the new Trading process supported the

definition of the functional specifications of the solution.

The most important features of the specified system are

summarized as follows:

Fully electronic activities of the trading process;

Manual execution of activities where soft issues

are involved (such as negotiations with the

customers and suppliers, qualitative evaluation

and decision taking). In these activities, the e-trade

system will only play a supportive role.

Interaction and communication with the external

entities (governmental agencies, suppliers)

through the Internet. The appropriate authorization

definitions will determine the access of the

external entities into the system.

The tendering process could be carried out in a

decentralized manner by the customers that hold

the largest percentage of the authorized procured

quantities, using sectional tendering sub-systems,

integrated to the central tendering system.

Interfaces with other existing governmental

information systems.

The different solutions of the system cover specific

needs of trading system at present or in the future.

IV. CONCLUSIONS

The structured approach of the study of the SIFCO

trading system, presented in this paper, enabled the

identification of problematic areas and supported the

design of the new e-trade system, facilitating the

definition of the necessary functional specifications for

the selection of the appropriate solution. The

methodology presented in this paper identified and

analyzed three alternative scenarios, which were ranked

according to the degree of the innovation they entail. The

analysis of the prerequisite business processes was

coupled with the design of new processes supported by

new business models of e-trade. The selected

“conservative” scenario was enriched by functionalities

offered by the two or more ‘‘innovative’’ scenarios.

The study revealed the difficulties in reengineering the

SIFCO Company as sample and identified the most

important barriers in the adoption of e-trading business

models. The thorough analysis of the existing legislative

framework was identified to be one of the most important

CSFs in the design of the new trading processes. This

explains the approach followed which placed a large

amount of effort in the careful analysis of the existing

trade process for the design of the new business processes

and the adoption of selected e-business models. The

designed functional specifications express the strategic

view of the SIFCO for the trade of the future, taking into

account the supply chain developments and also

Customer relationship management and the existing

practices in the suppliers and customers all over the world.

The expected benefits of cost reduction, improved

efficiency, effectiveness and absolute transparency will

result from the simplified processes, the electronic

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support of the activities, the continuous performance

measurement and the definition of clear roles and

responsibilities. The defined functional specifications

intend to successfully express the specific needs both in

services and change management that will support the

new Process.

The coordinator of trading system will be the SIFCO

responsibilities, while the users (internal customers) will

be the qualified. The suppliers (even SMEs sited outside

the capital) will be encouraged to participate in tenders

with simplified procedures and shorter lead times.

Furthermore, taking into account that procurement and

selling are key areas of the Internal Market, both in terms

of its economic importance and as an instrument of direct

economic influence for Member States’ administrations;

the new Trade system will help in SIFCO competition.

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Zahra Ghorbani Ravand. She was born in 1975

at Kashan, Iran. She has gotten bachelors in Industrial Engineering from Amir Kabir

University at Tehran in 1998 and masters in

Information technology at Tehran in 2005. She has 10 years’ experience in management in

different field such as Project Management,

Procurement Management, Planning Management and Organization Management. She worked as member of board and

HENDIJAN oilfield and Pipeline project manager at GIPCO for more

than three years from 2007 tp 2010. Now, she is managing director at SIFCO (Separouk Iranian Farda Company) for more than 3 years.

Salman Salimi Sadr. He was born in 1985 at

Tehran, Iran. He has gotten bachelors and Masters

in Mechanical Engineering from Azad South Tehran University in 2009. He has more than 7

years’ experience in oil and gas project

management and procurement of steel and piping materials for oil and gas projects. Now, he is

chairman at SIFCO (Separouk Iranian Farda

Company) for more than 3 years.

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